People save more when warned of financial shocks

PEOPLE are more likely to put money in savings accounts when nudged with marketing emails warning of financial shocks.

Behavioral research experiments in this country have found that news of financial shocks can help consumers develop positive short-term saving habits.

The research was conducted by the Economic and Social Research Institute (ESRI) on behalf of the Competition and Consumer Protection Commission (CCPC) and the Bank of Ireland.

As part of the trial, clients received marketing emails with consumer-friendly infographics illustrating financial shock statistics.

One of the news stories says that six out of ten people face unexpected expenses every year.

Customers who received these emails were 20% more likely to open a savings account than customers who received standard marketing materials.

The study’s financial shock emails and digital ads saw a “click through rate” of nearly 10%.

The tools identified in the study can be used by banks and credit unions to get more people to save precautionary to cope with rising prices, the CCPC said.

The study shows that by applying behavioral science to customer communications and application form design, a financial services firm can increase savings account utilization by over 25 percent.

ESRI’s research report also finds the greatest benefits among lower-income clients, who are most vulnerable to the negative impact of unexpected expenses and financial shocks.

CCPC Chairman Jeremy Godfrey: “This groundbreaking study, conducted by ESRI, Bank of Ireland and CCPC, has shown that when financial institutions use behavioral insights to inform their marketing materials and savings, many more customers will choose to save for the unexpected to design their application process.”

He encouraged other financial institutions to use this research to help more Irish consumers weather financial shocks without going into debt.

Meanwhile, four in 10 consumers managed to save more money during the pandemic than before the virus broke out.

The 25 to 34 year olds were the most likely to increase their savings.

According to a survey conducted for Aviva Life and Pensions Ireland, most people said that reducing spending opportunities was the main reason they were able to waste more money.

People who have saved less during the pandemic said a drop in household income was the main reason.

The survey found that more women (43 percent) than men (36 percent) have increased their savings over the past two years.

The study was conducted in March by iReach Insights on 1,000 adults across the country.

Half of 25-34 year olds have changed their saving habits for the better in the past two years, compared to a national average of 40 percent.

Uncertainty about the future was the trigger for almost four out of ten people to save more.

A large number of people said the pandemic had given them more time to get their financial affairs in order, and this was more true for younger age groups.

Now, more than a third of people have or would find it difficult to open up about their financial problems, with more men than women struggling with it.

Family members are most people’s first port of call when it comes to money, according to a survey commissioned by leading protection provider Royal London Ireland and conducted by iReach.

Karen Gallagher, interim prosecutor at Royal London Ireland, said it was important to have someone to turn to when it came to money-related stress.